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Question
Assume that an importer of wine were to purchase 5,000 cases of premium French Bordeaux for 700,000 euros. Further assume that the quoted exchange rates are as follows: spot rate = .70 euros to the U.S. dollar; 30-day forward rate = .705 euros to the U.S. dollar; and 90-day forward rate = .710 euros to the U.S. dollar. If the actual currency exchange rate at the time payment is due in 90 days is equal to the forward rate of .710 euros to the U.S. dollar, how much would the wine cost the importer in U.S. dollars if payment is made in 90 days? Round to the nearest dollar.A) $704,225
B) $355,000
C) $497,000
D) $985,915
Answer
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